UNESID Criticizes EU’s Energy Plans for Steel Industry: A Call for Immediate Reform
The Union of Steel Companies, the association representing the steel sector in Spain, has raised alarm about the European Commission's recent energy proposals. These include the Clean Industrial Pact and the Affordable Energy Action Plan aimed at reducing industrial energy costs across the European Union. According to UNESID, while these plans correctly identify the challenges of high energy prices for industries, they fall short in providing tangible solutions to the core problem: energy prices that are significantly higher in the EU than in competing global markets.
UNESID's primary criticism revolves around the persistent energy cost disparities that continue to disadvantage European manufacturers, particularly in energy-intensive industries such as steel production. With the steel sector playing a key role in the EU’s industrial landscape, its global competitiveness is being increasingly undermined by the higher electricity prices within the bloc.
Skyrocketing Energy Prices: A Major Threat to Steel Industry’s Competitiveness
Energy prices in the EU have remained well above historical levels, and are still two to four times higher than those in key global competitors, including China and the United States. According to UNESID, this energy price gap puts European steelmakers at a significant disadvantage. Energy represents a large proportion of the total production cost in the steel industry, which makes the high electricity prices in the EU a particularly significant barrier to the sector's survival and growth.
For the EU steel sector, these high energy costs are not just a matter of profit margins but also impact the competitiveness of European-made steel products in the global market. The EU’s steel industry is facing growing pressure from lower-cost regions, with many competitors able to produce steel more cheaply due to lower energy costs. This results in increased imports of steel products from countries where energy is more affordable, thus weakening the EU's economic sovereignty and industrial base.
The Clean Industrial Pact: A Correct Diagnosis but an Inadequate Remedy
The Clean Industrial Pact and the Affordable Energy Action Plan, both key parts of the European Green Deal, have been hailed as major initiatives aimed at securing low-carbon energy solutions for industries while simultaneously reducing energy costs. However, UNESID argues that these initiatives fail to address the root cause of the problem: the extremely high energy prices facing industrial consumers in the EU.
A major element of the Commission’s proposals involves the use of long-term power purchase agreements to help industrial consumers secure stable energy prices. While PPAs are a promising tool for securing future energy prices, UNESID claims that these agreements have not delivered tangible cost savings for industries thus far. Despite the growing use of renewable energy sources, which have lower generation costs, these savings are not being passed on to industrial consumers. Consequently, steel manufacturers and other energy-intensive industries are left struggling with high energy costs that are not competitive in comparison to global standards.
The Need for Structural Reform of the EU’s Energy Market
The core issue raised by UNESID is the lack of structural reform in the European energy market. At present, electricity prices in the EU are still heavily influenced by the cost of fossil fuels, despite the increased share of renewable energy in the EU’s energy mix. This link between electricity prices and fossil fuel prices is driving up costs for industrial consumers, particularly those in energy-intensive sectors like steelmaking.
To resolve this, UNESID is calling for a reform of the European electricity market, one that would decouple electricity prices from the volatile fossil fuel markets. By achieving this, electricity prices could become more stable and predictable, thus providing industries with the long-term certainty they need to plan investments, modernize, and achieve decarbonization goals. Without such reforms, energy prices will likely remain high, hampering the global competitiveness of the European steel industry and its ability to invest in low-carbon technologies.
Urgent Measures Needed for Industrial Competitiveness
While the EU's Green Deal and efforts to accelerate low-carbon energy investments are seen as positive steps toward a more sustainable energy future, UNESID insists that these measures will take years to produce tangible results. The steel industry cannot afford to wait that long. In the meantime, immediate solutions are needed to ensure that European steelmakers can remain competitive on the global stage. UNESID is calling for urgent measures to address energy costs, such as clear guidelines for long-term energy agreements that guarantee stable and competitive prices for industries that rely heavily on energy, like steel production.
The organization is also advocating for harmonized measures across the EU to reduce regulatory costs in electricity bills, which currently add unnecessary burdens to industrial consumers. By cutting down on bureaucratic red tape, industries could experience a reduction in their overall energy costs, making it easier for them to stay competitive in an increasingly globalized market.
The EU Steel Industry's Sustainability Challenges: Transitioning to Low-Carbon Technologies
Another critical issue that UNESID highlights is the intersection between energy costs and the EU's decarbonization targets. While the EU steel industry is committed to reducing its carbon footprint and meeting the climate goals set by the European Green Deal, it faces a difficult challenge in doing so without affordable energy. Transitioning to low-carbon technologies such as electric arc furnaces or hydrogen-based steelmaking requires significant energy input, which is difficult to sustain when energy costs remain so high.
As a result, the EU’s steel industry may struggle to meet its decarbonization goals if energy prices continue to hinder its ability to invest in cleaner technologies. UNESID argues that affordable energy is not only essential for industrial competitiveness but is also a key enabler of the EU’s climate ambitions. Without affordable energy, the transition to green steel will be delayed or made economically unfeasible, undermining both economic and environmental objectives.
Call for Immediate Action to Safeguard Jobs and Industry Future
Finally, Carola Hermoso, the General Director of UNESID, has stressed the urgency of the situation. Without immediate reforms, the European steel sector faces an uncertain future. The high energy costs are putting thousands of jobs at risk, as steelmakers may struggle to maintain operations in the face of higher production costs. If the situation is not addressed quickly, there is a real threat that European steel production could be outsourced to countries with lower energy costs, resulting in a loss of jobs and a decline in the EU’s industrial base.
UNESID has called on the European Commission to act immediately and implement structural reforms in the energy market that would provide the steel industry with the affordable energy it needs to remain competitive and continue investing in sustainable technologies. Decarbonization cannot be achieved without first ensuring that energy costs are competitive, and steelmaking jobs in Europe are not jeopardized by rising energy prices.
Key Takeaways:
• UNESID criticizes the European Commission’s Clean Industrial Pact and Affordable Energy Action Plan for failing to address the high energy costs facing the European steel industry.
• Energy prices in the EU are still 2-4 times higher than in countries like China and the US, putting European steelmakers at a significant disadvantage in the global market.
• Power purchase agreements, proposed by the Commission, have not led to tangible cost savings for industrial consumers, failing to pass on the benefits of renewable energy.
• The European energy market needs structural reforms to decouple electricity prices from fossil fuel prices in order to ensure affordable energy for industries like steel.
• Immediate measures are needed to ensure stable and competitive energy prices for energy-intensive industries, as low-carbon energy investments will take years to fully impact the sector.
• The EU’s decarbonization goals for the steel sector are at risk without affordable energy, as high energy costs hinder investment in green technologies.
• Without urgent action, the EU steel industry risks losing its global competitiveness, while thousands of jobs are in jeopardy due to high energy costs and economic instability.
